TMI Blog2016 (10) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... in own case [ 2016 (2) TMI 1306 - ITAT DELHI] TPO proposed the transfer pricing adjustment with Nil ALP of the international transaction of `Payment of royalty on the ground that no such payment was warranted and further no cost benefit analysis on this count was brought to his notice and as such the payment of royalty was not required. AO in his final assessment order has taken the ALP at Nil on the basis of recommendation of the TPO without carrying out any independent investigation in terms of the deductibility or otherwise of such payment in terms of section 37(1) of the Act. As per the ratio decidendi of Cushman Wakefield India (P.) Ltd.[ 2014 (5) TMI 897 - DELHI HIGH COURT] the TPO was required to simply determine the ALP of this transaction unconcerned with the fact, if any benefit accrued to the assessee and thereafter, it was for the AO to decide the deductibility of this amount u/s 37(1) of the Act. Thus we set aside the impugned order on this score and remit the matter to the file of AO/TPO for deciding it in conformity with the law laid down above. Ad-hoc disallowance on account of advertising and sales promotion expenses incurred by the assessee - assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of international transactions of payment of corporate charges as NIL as against ₹ 2,53,87,180 incurred by the appellant, alleging that (i) no services were received by the appellant (ii) cost are charged on allocation basis and therefore, some of the group cost may be loaded in appellant share of corporate charges (iii) the services received are incidental being in the nature of long association. 2.2 That the assessing officer/TPO erred on facts and in law in not appreciating that the payment of corporate charges was appropriately benchmarked applying TNMM as most appropriate method and that no adverse inference could be drawn on this account. 2.3 That the assessing officer/TPO erred on facts and in law in computing adjustment on account of international transaction of payment of corporate charges without reasonably applying any prescribed methods, thereby, violating the basic principles of TP regulations. 2.4 That the assessing officer/TPO erred on facts and in law in undertaking cost benefit analysis to determine the arm's length price of payment of corporate charges without appreciating that costbenefit analysis is not a prescribed method under Rule 10B of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how provided by the AE and the fees for technical services is paid as percentage of sales. 3.3 That the assessing officer/TPO erred on facts and in law in not appreciating that the intangibles provided by the AE helps the appellant to manufacture new products, upgrade existing products, reduce manpower, reduce raw material cost and increase in productivity. 3.4 That the Dispute Resolution Panel erred on facts and in law in confirming the adjustment made by the TPO with regard to the payment of royalty by relying on its order for AY 2009-10 AY 2010-11 and holding that the issues are identical. 4. That the assessing officer erred on facts and in law in making an ad-hoc disallowance of ₹ 2,75,437 to the returned income on account of advertising and sales promotion expenses incurred by the assessee. 4.1 That the assessing officer erred on facts and in law in making ad-hoc disallowance of 5% of advertising publicity expenditure incurred by the assessee during the relevant previous year by holding that complete bills/vouchers in support of its claims of advertising sales promotion expenses was not produced before the assessing officer. 4.2 That the assessing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s failed to substantiate that services have actually been rendered to it and benefit has actually been derived by it on the basis of documentary evidence. He further observed that the assessee in support of its contention has merely furnished copies of certain mails exchanged between its personnel. The TPO was of the view that none of the e-mails exchanged between the employees established the requirement/specific need of the assessee for their services, the benefit which had accrued to the assessee or that an independent party would have been willing to pay another independent party for the services purported to be received by the taxpayer. The TPO applied CUP method and concluded that the arm s length price of this transaction for payment of corporate charges was at Nil as against ₹ 2,53,87,180/- paid by the assessee to its AE. Thereafter, the AO passed the draft assessment order by making the addition of aforesaid amount. Against the draft assessment order, the assessee raised the objection before the ld. DRP who upheld the additions made by the TPO. Accordingly, the AO made the impugned addition of ₹ 2,53,87,180/- on account of arm s length price of payment relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by its AE during the financial year 2007-08. The detailed break up of invoices on the basis of nature of services and the summary of the man hours spent by the various divisions of the AE in rendering technical, marketing and administrative service to Contitech group of companies. It is a case of the assessee that the above said specific details or complete break up of how the cost has been allocated could not be furnished before the completion of the proceedings before the TPO/DRP, since these details were to be obtained from its AE Germany. We find that the details now produced have an important bearing for resolving the transfer pricing dispute and therefore in the interest substantial justice and equity, we admit the same on record. Since the additional evidence is admitted on record the same needs to verify by the TPO/AO. Hence, the transfer pricing dispute of payment of corporate charges is restored to the TPO for denovo consideration. Needless to state the assessee shall be afforded reasonable opportunity of being heard before the matter is decided. It is ordered accordingly. 9. Since the facts for the year under consideration are identical to the facts involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AR fairly admitted that there is no independent discussion in the assessment order about the disallowance of royalty payment, except for reproduction of the relevant parts from the order of the TPO. 9. The Hon'ble Delhi High Court in CIT v. Cushman Wakefield (India) (P.) Ltd. (2014) 367 ITR 730(Del) has held that the authority of the TPO is limited to conducting transfer pricing analysis for determining the ALP of an international transaction and not to decide if such services exist or benefits did accrue to the assessee. Such later aspects have been held to be falling in the exclusive domain of the AO. In that case, it was observed that the E-mails considered by tribunal from Mr. Braganza and Mr. Choudhary dealt with specific interaction and related to benefits obtained by assessee, providing a sufficient basis to hold that benefit accrued to assessee. Since the details of specific activities for which cost was incurred by both AEs (for activities of Mr. Braganza and Mr. Choudhary), and attendant benefits to assessee were not considered, the Hon'ble High Court remanded the matter to file of concerned AO for an ALP assessment by TPO, followed by AO's assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% of ₹ 55,08,731/- was made. 17. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee submitted that the AO had not brought any evidence on record to substantiate that the sales promotion and advertising expenses was not incurred by the assessee for the business purposes. It was further stated that despite of all bills/vouchers as asked by the AO being produced before him, the AO without pointing out any specific instance of nonincurrence of said expenditure, had simply disallowed @ 5% of the total expenditure which was not justified. The reliance was placed on the following case laws: Dwarka Prasad Agarwal Vs ITO 52 ITD 239 (Cal) Mahendra Oil Cake Industries Pvt. Ltd. Vs ACIT 55 TTJ 711 Rattah Mechanical Works Ltd. Vs ITO 87 Taxman 288 (Chd.) Shriram Pistons and Rings Ltd. Vs IAC 39 TTJ 132(Del.) CIT Vs Gemi Motors India Ltd. in ITA 130 of 2011 J.J. Enterprises Vs CIT 254 ITR 216 (SC) Friends Clearing Agency P. Ltd. Vs CIT 332 ITR 269 (Del) Nodi Exports Vs ACIT 24 SOT 526 (Del) ACIT Vs Amtek Auto Ltd. 112 TTJ 455 (Del) Roger Enterprises Pvt. Ltd. Vs ITA 52 TTJ 198 (Del) Ramji Das Modi Vs DCIT 110 Taxman ..... X X X X Extracts X X X X X X X X Extracts X X X X
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